If you received the money prior to March 15 2007 you should have included the return of the principal in your 2006 taxes as additional wages, and you then report any earnings that may have been included in the payment in your 2007 taxes. Your 1099-R should have a code indicated - is it P? One possible fix now would be to add the total amount to your 2007 taxes on line 21 with a note that says "return of excess contribtions and earnings for tax year 2006."

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